Apple To Be Hurt By Increase In Import Tax On Electronic Items Including Cell Phones By India

12/15/2017

With the intention of providing a fillip to the domestic electronics industry in India, the government there has announced an increase in the taxes on importing of dozens of electronic items – from smartphones to television sets.

This move has a direct bearing on the business of iPhone maker Apple’s business in the very fast-growing smartphone market in India. The company has been attempting to boost its revenue growth in that market which is valued at about 410 billion annually and the raising of import taxes on smart phone handsets to 15 per cent from 10 per cent will result in most of Apple’s iPhones getting costlier in the country.

Electronics has been one of the areas where the present government has been focusing on developing the domestic production base through Prime Minister Narendra Modi’s flagship campaign of Make-in-India. The program aims to enhance the domestic industrial base.

At present, the domestic cell phone manufacturers in India are churning out about 500 million units a year which is more than double the number than the industry produced about three years ago and the increase in import taxes would be a boost to that local industry, said Pankaj Mohindroo, president of the Indian Cellular Association.

Data from Counterpoint Research showed that in India in 2017, eight out of ten phones sold in the market were made locally.

Most of the handsets that Samsung Electronics sells in the Indian market are assembled in India,

At present, only the iPhone SE model is assembled by Apple in India while the rest of the models are imported. The iPhone maker has reportedly requested the Indian government to allow it a wide range of incentives and tax benefits exchange of it setting up a manufacturing unit in the country. But sources have also confirmed that such requests have been denied by the government.

Those mobile phone companies that significantly depend on imports to offer their phone in the India market would be the ones who would be most impacted by the government’s decision to raise import duties, said Tarun Pathak, an associate director at Counterpoint Research.

“It will impact Apple the most as the company imports 88 percent of its devices into India,” he said. “Either this will lead to increase in iPhone prices or force Apple to start assembling more in India.”

The government statement said that the import tax on television sets were doubled to 20 per cent while those for video cameras was also increased to 15 per cent, apart from cellphones.

Just before Indian finance minister Arun Jaitley is getting ready to prepare the federal budget for 2017-18, he was requested to help the promotion of the domestic industry by the members from the Indian telecoms equipment manufacturers association on Monday.

In recent months, policy makers have been concerned with the rise of the volume of imports of goods into India in the seven months till October this year which saw a 22 per cent year-on-year rise, to reach $256.4 billion.